Has Profitability of Foodgrain Production Declined After Implementation of MGNREGS in India?

Whether national rural employment guarantee scheme (MGNREGS) introduced during 2006 has increased the farm wage rate substantially to the point that has reduced farm profitability due to the programme. This is still an unsettled issue in the literature. Hence, in this paper, an attempt has been made to analyse these issues utilising cost of cultivation survey data published by the Commission for Agricultural Costs and Prices. With the data of different states from 2000–01 to 2010–11, the study has covered five different foodgrain crops namely paddy, wheat, jowar, bengal gram (channa) and pigeon peas (red gram) for the analysis. The study does not seem to support the argument that the profitability of foodgrain crops has declined after the introduction of MGNREGS. This is not only true with high area with high productivity (HAHP) states but also with high area with low productivity (HALP) states. However, this study shows that the real cost incurred on account of human labour has increased considerably in all five crops in both High and low productivity states during the MGNREGS period (2006–07 to 2010–11) as compared to preceding years. In fact, real profitability even after subtracting the cost of imputed value of family labour cost used in the cultivation of the crops (cost C2) has either increased or the losses incurred reduced in all five crops in both HAHP and HALP states. The number of years profit realised by the farmers has also increased in most crops during post-MGNREGS period as compared to pre-MGNREGS period (2000–01 to 2005–06). Increased productivity of most of these crops also might have helped to increase the profitability of farmers across the country, even taking account increase in human labour cost during the same period